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WHERE DO I START WHEN CREATING A TRADING STRATEGY?

CREATE TRADE STRATEGY

The majority of people believe that trading at random provides them an advantage. However, you must realise that the majority of people are not’mostly’ lucrative. Take a look at what we do with a backtested strategy and how we accomplish it. It’s merely a method of demonstrating why a Trading Strategy is important and how it can make it easier for you to ride the markets and stay on Mr Market’s good side.

You must comprehend why Abraham Lincoln, America’s President, said that if he had 4 hours to chop a tree, he would spend 3 hours sharpening his axe. So, what gives you the impression that you can trade the market without using a valid back-tested strategy?

The benefit of a trading strategy is that it can be developed. The difficult part, on the other hand, is ensuring that it is lucrative. Also, keep in mind that you are not developing a trading technique in order to become wealthy quickly. Even so, you’re developing a trading strategy to protect your money in the market.

Trading Cafe India’s complete guide on developing a winning trading strategy is available here.

What Kind of Trader Do You Think You Are?

Before you can build your ideal trading strategy, you must first understand how the market works. You must realise that the market is not obligated to you in any way. However, in order to profit from the market, you must align yourself with its moves.

You must first determine what type of trader you are before developing a trading plan. You may be a swing trader, a pullback trader, or a turtle trader. Whatever it is, you must first clear it in your mind. After you’ve answered this question, you can confidently move on to developing your own trading strategy.

You must also determine if you will employ your approach on the purchasing or selling side, or both. When people have a bullish bias rather than a bearish inclination, they are significantly more at ease. On the other hand, some people may be looking for a technique to short the market at all times. You have to figure out which one you are. It’s fine to be bullish and bearish, in our perspective. In fact, we feel that in the market, one should always be on the lookout for a chance to profit from both sides’ movement.

Where Will Your Strategy Be Effective? Is it True or False?

When it comes to our Indian stock market, it contains around four to five trading sectors. That implies you can choose one of the four divisions for your trading strategy. Equity (cash), futures, options, and commodities are the different types of investments.

It’s important to understand that a specific collection of scanners, patterns, and methods will only operate in a specific market sector. In the cash market, for example, a put debit spread will not operate. In the options market, simply purchasing and holding may not provide an advantage.

The basic line is that you must pick which market you must trade, and after you have done so, it will be much easier for you to devise your own trading strategy.

“What is my trading style?” you might wonder.

STRATEGY

If you want to be sure that you’ve made enough progress toward creating your first trading strategy, you’ll need to answer the question about what kind of trader you are. Some people are scalpers, while others buy and keep for years, or simply trade positionally or day.

Obviously, you cannot eat at everyone’s table, or you will be left hungry. Your trading strategy is no exception. For different types of trade calls, you’ll need to develop different setups.

Another of our methods – the time range – is hidden within this strategy. Just be sure of your time horizon before you undertake any trade. It matters a lot how long you stay in the business. Not to mention the thousands of traders who become investors after cancelling their trades.

Have Something To Assist You In Picking Up The Pace

You’ll need a tool or a technique to help you measure the momentum in the scrip you’ll be in if you want to keep to your time horizon with complete certainty. Assume you notice a gorgeous pattern on a chart and make a trade based on it. Now you must be able to predict how quickly the trade will go in your favour. Because, as the saying goes, your best trades start coming up shortly after you enter…!!????

To enter a trade, many people employ a variety of indicators as well as price action. These indicators, one of which is the RSI, assist traders in detecting momentum before entering a transaction.

Also, make sure your trading technique doesn’t allow you to enter a transaction at any time. Entering a long trade at support levels or a short trade at resistance levels, for example, should be based entirely on logic.

Whether you’re a turtle or the last kisser,

Whether there is a reversal or a breakout on a chart, the retest occurs over 90% of the time. These situations can be traded in two ways. Look at your trading plan to see which way it suggests. Go for it if your trading style lends you to trading the retest of a Breakout or Breakdown. If not, your strategy should wait for a last kiss or a retest of the breakout zone before entering.

Losses should be managed via strategy.

If your trading method doesn’t help you reduce the downside of a trade, it’s not worth a dime. As a skilled trader, your first priority is to save money and subsequently to appreciate it.

So, if you’re ever proven wrong in a trade, build a method that allows you to exit with the smallest possible loss. A trendline break, Fibonacci level rejection, or even a MACD bearish crossover can all be used as signals.

Remember to perform a backtest.

Your trading plan is nearly complete, but we shouldn’t start applying it until we’re completely confident in it. You have access to all historical market data from across the world. All you have to do now is backtest your approach using all of the charts and data. You should also perform forwarding testing in addition to backtesting. Now you may put your trading method to the test in the live market with a little amount of money. Do not proceed with the technique and regular quantities into the live Market unless you are completely certain.

Conclusion

So there you have it: these are our tried-and-true methods for creating your first trading strategy. We’re hoping it’ll be just as profitable…!!

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